Rationale: Significant strategic mis-step. Marutis lack of control over production cost is worry. Risk of earnings deterioration and cash drain by Suzuki likely to remain overhang in near term

Brokerage: Deutsche

Recommendation

Old: Buy

New: Buy

Price

Old: 3,075

New: 3,150

Rationale: New factory announcement is a twist. Capital structure a surprise as Suzuki will own 100%. Maruti shares fell sharply as expectations of stake increase by Suzuki did not materialise

Brokerage: ICICI Securities

Recommendation

Old: Add

New: Reduce

Price

Old: 1,626

New: 1,634

Rationale: Good result, but there is trust deficit. Result completely overshadowed by Gujarat announcement. We fear devil may lie in detail. Last year, Maruti Suzuki merged another company (SPIL) with itself, citing better control, synergies. Now it has done exactly the opposite. This raises questions on how future strategies will be played out

Brokerage: Ambit

Recommendation

Old: Buy

New: Underreview

Price

Old: 1,850

New: Underreview

Rationale: Suzuki proposal appears positive for Maruti in near term. However, capex for future phases will be indirectly funded by Maruti. Hence, Maruti shareholders will end up funding capacity, which will be owned by Suzuki

PROXY ADVISORY FIRMS

IIAS: The announcement regarding the Gujarat plant adds to the complexity and the ambiguity of the operating and ownership structure. Existing shareholders have been left with several unanswered questions, and no ability or opportunity to ask them

InGovern: Pliable board of Maruti Suzuki has done grave injustice to minority shareholders of MSIL. There is no compelling business logic for such an arrangement when Maruti has necessary capital raising ability to make investments. Minority shareholders should oppose this move, and register a complaint with Sebi